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Exam 16: Sales and Lease Contracts: Performance, Warranties, and Remedies

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Question 51

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Reference - Used Car Commission. William promised to sell Helen's car for her, but he wanted a commission of 10%. Helen signed an instrument promising to pay William a 10% commission if he sold her car. William assigned the agreement to Phil. Helen's car was sold and the buyer paid Helen. A dispute ensued between Helen and William regarding whether William found the buyer or the buyer found Helen. When Phil asked Helen for payment on the instrument, Helen refused. William, Helen, and Phil settled their dispute without going to court, and Helen wrote Phil a check for $3,000. Phil endorsed the check on the back planning to take it to the bank the next day. Unfortunately, Phil lost the check which was found by Barry and cashed by the local bank. Barry then left town. Which of the following is true regarding the instrument signed by Helen promising to pay William a 10% commission if he sold her car?

A) The instrument is negotiable.
B) The instrument is not negotiable only because it is based on a condition.
C) The instrument is not negotiable only because Helen is not a merchant.
D) The instrument is not negotiable only because it is not for a sum certain.
E) The instrument is not negotiable because it is based on a condition and also because it is not for a sum certain.

F) B) and E)
G) C) and D)

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Question 52

Multiple Choice

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Which of the following is true regarding whether an agent's signature may satisfy the requirement of negotiability that the signature of a maker or drawer appear?

A) An agent's signature on behalf of his or her principal binds the principal and satisfies the signature requirement for negotiability.
B) An agent's signature on behalf of his or her principal cannot bind the principal and does not satisfy the signature requirement for negotiability.
C) An agent's signature on behalf of his or her principal binds the principal and satisfies the signature requirement for negotiability only if specific authorization from the principal allowing the agent to act on the specific transaction at issue is attached to the document.
D) An agent's signature on behalf of his or her principal binds the principal and satisfies the signature requirement for negotiability only if the instrument is for an amount over $1,000.
E) An agent's signature on behalf of his or her principal binds the principal and satisfies the signature requirement for negotiability only if the instrument is in an amount of $1,000 or less.

F) A) and B)
G) A) and E)

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Question 53

Multiple Choice

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Which of the following is the transfer of possession of a negotiable instrument to a third party who becomes a holder of the negotiable instrument?

Reference - Stolen Purses. Sandra and Mary were having lunch at their favorite restaurant. Unfortunately, a thief stole their purses containing their ATM cards. Mary notified her bank the next day of the theft of the ATM card. Unfortunately, the card had already been used to fraudulently obtain over $1,000. Sandra thought back to her business law class and did not call her bank, however, because she believed that she would not be liable for any charges on the ATM card because of the rules involving forgeries. Nevertheless, a week or so later when Sandra was in the bank, she casually mentioned to the teller that she needed a new card because hers had been lost. She was shocked when a bank representative attempted to hold her responsible for hundreds of dollars of goods bought with the ATM. Sandra told the bank representative that she refused to cover the amounts, that she was moving her account, and that she wanted all preauthorized payments and EFTs stopped immediately. For how much can the bank hold Sandra responsible based on the fraudulent use of the card?

Which of the following does not satisfy the requirement that to be negotiable an instrument must be payable at a time certain or on demand?

A ___________ check is a check that is accepted at the bank at which it is drawn.

If a check is not presented to a bank within ____________ of its date, the check is considered stale check.

Which of the following was the result on appeal in The Twin City Bank v. Kenneth Isaacs, the case in the text in which the bank appealed a judgment against it for significant damages after the bank wrongfully held funds of depositors who had been the victim of check forgery?

Reference - Stolen Purses. Sandra and Mary were having lunch at their favorite restaurant. Unfortunately, a thief stole their purses containing their ATM cards. Mary notified her bank the next day of the theft of the ATM card. Unfortunately, the card had already been used to fraudulently obtain over $1,000. Sandra thought back to her business law class and did not call her bank, however, because she believed that she would not be liable for any charges on the ATM card because of the rules involving forgeries. Nevertheless, a week or so later when Sandra was in the bank, she casually mentioned to the teller that she needed a new card because hers had been lost. She was shocked when a bank representative attempted to hold her responsible for hundreds of dollars of goods bought with the ATM. Sandra told the bank representative that she refused to cover the amounts, that she was moving her account, and that she wanted all preauthorized payments and EFTs stopped immediately. Which of the following is true regarding the bank's obligation to end preauthorized payments?

Reference - Book Payment. Molly and Pat signed a contract providing that "Pat will furnish the correct used business law book for use in Molly's business law class; and in return on August 15, 2011, Molly promises to pay Pat $50 for the book." Molly took the book and planned to pay Pat. Meanwhile, Pat properly assigned the contract Molly had signed to Jack. When Molly went to class, however, she discovered that the book was the incorrect book. When Jack asked Molly for payment, Molly refused. Molly told Jack that the book was useless to her and that she was not paying either him or Pat anything for it. Jack told Molly that he had an enforceable assignment in the form of a negotiable instrument and that he could collect regardless of whether the book was useless. Molly did not believe him. Continuing with her attempt to save money on books, Molly agreed to buy Tim's U.S. history book for $40. She had an oral agreement with Tim that he would give her the book and that she would pay him in three days. This time Molly got the right book. Tim, in writing, properly assigned the right to the $40 payment to Richard. Richard asked Molly for the money. Molly admitted her agreement with Tim but told Richard that she was not going to pay him because he did not have a negotiable instrument. Molly also purchased a communications book from Sam promising in writing to give him in return the next day, to his order, a used DVD player she owned. Which of the following is true regarding Jack's claim that he had a negotiable instrument and could collect from Molly?

Which of the following is typically a plastic card containing magnetic strips containing data regarding the value of the card?

Which of the following is the party receiving the money from the draft?

If a customer's ATM card is lost or stolen, the customer must notify the bank within _____ days; and if that is done, the customer is then liable for only the first _____ stolen.

According to the UCC, a check is a special kind of draft.

Which of the following satisfies the currency requirement for negotiability in this country?

Describe a traveler's check setting forth the elements necessary for its proper payment.

When the depositary bank is the same bank as the payer bank, the check is referred to as a[n] _______________.

An instrument that reads, "Pay to the order of Jones or Green," is payable to _________ payees.

Which of the following is a bank receiving a transferred check during a collection process (excluding the first bank and the last bank) ?

Which of the following are types of unqualified endorsements?